Union Mutual Fund gets SEBI approval for new Equity Fund-of-Funds

Mumbai, July 21, 2025: Union Mutual Fund has received regulatory approval from the Securities and Exchange Board of India (SEBI) to launch its new scheme, the Union Diversified Equity All Cap Active Fund of Funds (FOF). This open-ended fund-of-funds product is designed to provide long-term capital appreciation by investing in a diversified basket of equity-oriented mutual fund schemes across various market capitalisations.

The scheme aims to cater to investors seeking equity exposure through a professionally managed allocation model that spans large-cap, mid-cap, small-cap, and multicap strategies. As per the Scheme Information Document (SID) dated 4 February 2025, the scheme has been structured in full compliance with the SEBI (Mutual Funds) Regulations, 1996.

Investment Objective and Strategy

The primary objective of the Union Diversified Equity All Cap Active FOF is to generate capital appreciation over the long term by predominantly investing in equity-oriented mutual fund schemes that are based on varied market caps. It’s important to note that the scheme does not invest directly in equity stocks but rather through units of existing or prospective mutual fund schemes of Union Mutual Fund or third-party domestic mutual funds.

While there is no guarantee that the investment objective will be achieved, the strategy offers diversification benefits, professional management, and dynamic rebalancing based on market trends and opportunities.

Asset Allocation Pattern

Under normal circumstances, the fund will follow the asset allocation strategy below:

Instruments such as government securities, Treasury Bills (T-bills), and Tri-party Repo (TREPS) may also be utilised for liquidity management. No exposure will be taken in foreign/overseas securities, derivatives, Real Estate Investment Trusts (REITs), or structured obligations.

Scheme Features and Facilities

The scheme will be available in both Regular and Direct Plans, with options for Growth and Income Distribution cum Capital Withdrawal (IDCW). Minimum application amounts start at ₹1,000, with Systematic Investment Plan (SIP) options available from as low as ₹100 per instalment.

The SID also outlines the availability of several investment facilities:

• Systematic Investment Plan (SIP) with Top-up and Pause features
• Systematic Transfer Plan (STP), including the STP Intello facility based on market allocation signals
• Systematic Withdrawal Plan (SWP)
• Smart-Stagger Plan for phased investments
• Multi-Scheme Investment Facility for bundling multiple schemes in one application
• Execution-only Platforms (EOPs) and transactions via MFCentral and MF Utility

Redemption proceeds will be transferred within three working days, and IDCW payouts will be made within seven working days from the record date.

Benchmark and NAV Disclosure

The scheme’s performance will be benchmarked against the BSE 500 Total Return Index (TRI), which broadly represents the Indian equity market across large, mid, and small-cap companies. The Net Asset Value (NAV) will be disclosed on all business days, with publication by 10:00 a.m. on both the AMC and AMFI websites.

Cost and Expenses

The maximum Total Expense Ratio (TER) is capped at 2.25%, in line with SEBI regulations. Additional expenses may be charged up to 0.05% and 0.30% for retail flows from cities beyond the top 30 (B30), subject to qualifying criteria.

Investors should note that the FOF structure leads to layered costs, as they will also bear the expense ratios of the underlying schemes in addition to this fund’s own expenses.

Fund Management Team

The scheme will be jointly managed by:

• Mr. Gaurav Chopra: Holds a B.Com, is a Chartered Accountant, and is CFA (USA) Level III cleared. He brings over 10 years of equity market experience, previously working with Centrum Portfolio Management Services and Barclays Wealth Trustees.
• Mr. Pratik Dharmshi: A Chartered Accountant with over 14 years of industry experience. His past roles include associations with UTI Pension Fund, Safe Enterprises, Girik Capital, Edelweiss AMC, JP Morgan India Pvt. Ltd., CRISIL Ltd., and Morgan Stanley Advantage Services Pvt. Ltd.

Their combined expertise will guide the fund’s allocation decisions and risk mitigation strategies in alignment with macroeconomic outlooks and sectoral fundamentals.

Analysis of the Union Diversified Equity All Cap Active Fund of Funds Scheme

The Union Diversified Equity All Cap Active FOF is a well-structured product that seeks to deliver long-term capital appreciation through a diversified equity strategy without directly investing in stocks. Here’s a detailed breakdown of the scheme’s merits and considerations:

Strengths:

1. All-Cap Diversification:
   • By allocating across large, mid, and small-cap equity schemes, it offers balanced exposure to growth and stability.
   • Helps mitigate risks associated with single-segment market concentration.
2. Professional Allocation Strategy:
   • Managed by experienced fund managers with flexibility to dynamically rebalance based on market cycles and macro trends.
3. Low Entry Barriers:
   • Minimum SIP of ₹100 and a lump sum of ₹1,000 make it retail investor-friendly.
4. Supportive Facilities:
   • Offers SIP, STP (including STP Intello), SWP, and other investor-centric options, catering to various investment styles.
5. Benchmark Choice:
   • BSE 500 TRI provides a comprehensive benchmark, aligning with the scheme’s all-cap mandate.

Considerations:

1. Double Layered Costs:
   • Being a fund-of-funds, investors will bear both this fund’s expenses and those of the underlying mutual fund schemes. TER can cumulatively reduce returns, especially in flat or low-return years.
2. No Foreign Exposure:
   • Lack of global diversification could limit upside during phases when international equities outperform.
3. Active Allocation Risk:
   • Performance depends heavily on the fund managers’ ability to pick the right underlying schemes and rebalance at the right time.
4. Equity Volatility:
   • Despite diversification, it remains an equity-oriented product and carries associated market risks. Not ideal for short-term investors or those with low risk tolerance.

About Union Mutual Fund

Union Mutual Fund is jointly sponsored by Union Bank of India, one of India’s largest public sector banks, and Dai-ichi Life Holdings Inc., a major life insurance group from Japan. The AMC, Union Asset Management Company Pvt. Ltd., offers a mix of equity, hybrid, and debt products and serves investors across the retail and institutional segments.

For more information, visit: www.unionmf.com

REF: https://www.sebi.gov.in/filings/mutual-funds/jul-2025/union-diversified-equity-all-cap-active-fof_95465.html

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